Move To Appoint Executive Chairman At Modi Rubber

The move, aimed at resolving the board imbroglio, is, however, being strongly resisted by the two sections of the Modis. If carried out, the move is likely to result in a rethink in financial institutions on their decision to sell their stake through auction.

The institutions' stake was initially estimated at 52 per cent, but it now appears that it is about 47 per cent. Of this, 40 per cent is held by LIC, GIC and UTI and the balance 7 per cent by IDBI and IFCI.

The institutions earlier decided to sell their stake and call for open offers. The took the decision on the ground that because of

 

conflicts within the board, the company's fortunes were dwindling. Moreover, over Rs 1,000 crore owed by the Modi group still remains unpaid as the the Modis have made the division of family assets a precondition to meeting this liability.

Responding to the move to instal an executive chairman, Modis say the move will not fructify. B K Modi says: "The FIs' stake in the company is down to about 45 per cent. We are in the process of finding a solution with Continental as their chairman is on our board. They will make an investment of about Rs 100 crore."

The motive behind the institutions' move is to ensure an amicable end to the dispute between the two Modi factions, which FIs believe has upset the working of the company. Stripping the two Modi factions of their executive powers, it is believed, will be a major step towards restoring administrative control, say LIC officials.

Officials believe that if this proposal is finally carried out, then the financial institutions need not press aherad with the plan to auction their stake.

The institutions' earlier plan to sell their stake had sent shock waves through the corporate world. The institutions' combined holdings in domestic companies range from 30 to 60 per cent. In fact, a Calcutta-based industrialist had even sent in a proposal to the finance ministry that the institutions should gradually reduce their holdings to 15 per cent. Some sections of the ministry have proposed a cap of 24 per cent, while others have opposed the move on the ground that it would make it impossible to initiate good governance in these outfits.